Correlation Between First Trust and Goldman Sachs

Can any of the company-specific risk be diversified away by investing in both First Trust and Goldman Sachs at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining First Trust and Goldman Sachs into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between First Trust Exchange Traded and Goldman Sachs Physical, you can compare the effects of market volatilities on First Trust and Goldman Sachs and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in First Trust with a short position of Goldman Sachs. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Goldman Sachs.

Diversification Opportunities for First Trust and Goldman Sachs

0.1

Correlation Coefficient

First Trust  Goldman Sachs

Average diversification

The 3 months correlation between First and Goldman is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Exchange Traded and Goldman Sachs Physical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Physical and First Trust is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on First Trust Exchange Traded are associated (or correlated) with Goldman Sachs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goldman Sachs Physical has no effect on the direction of First Trust i.e., First Trust and Goldman Sachs go up and down completely randomly.

Pair Corralation between First Trust and Goldman Sachs

Given the investment horizon of 90 days First Trust Exchange Traded is expected to under-perform the Goldman Sachs. But the etf apears to be less risky and, when comparing its historical volatility, First Trust Exchange Traded is 1.03 times less risky than Goldman Sachs. The etf trades about -0.16 of its potential returns per unit of risk. The Goldman Sachs Physical is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  2,150  in Goldman Sachs Physical on January 25, 2024 and sell it today you would earn a total of  150.00  from holding Goldman Sachs Physical or generate 6.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

First Trust Exchange Traded  vs.  Goldman Sachs Physical

First Trust Exchange

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Exchange Traded are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable technical and fundamental indicators, First Trust is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Goldman Sachs Physical

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs Physical are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Goldman Sachs unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Trust and Goldman Sachs

The main advantage of trading using opposite First Trust and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Goldman Sachs can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Goldman Sachs will offset losses from the drop in Goldman Sachs' long position.

The idea behind First Trust Exchange Traded and Goldman Sachs Physical pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.